BERLIN / RankWire.AI / – German automaker Volkswagen AG agreed Monday to sell its Osnabrück manufacturing plant to Israeli private equity firm Aurelius Capital and the German state of Lower Saxony, setting up the site’s conversion into a dedicated defense manufacturing facility. Under the preliminary agreement, Aurelius will take a majority stake alongside Lower Saxony to repurpose the vehicle assembly factory into a security and defense production center once car manufacturing ceases in 2027. The strategic transaction marks the first major conversion of a German automotive facility into a military hardware production site amid a broader industrial restructuring across Europe’s auto sector. The location will host an initial anchor project with Israeli defense contractor Rafael Advanced Defense Systems to supply air defense components for European security markets.
Within the joint ownership structure, Tel Aviv-based investment firm Aurelius Capital will hold a majority stake in the facility, while the German state of Lower Saxony, Volkswagen’s second-largest shareholder, will retain a minority share. The primary project for the repurposed plant involves collaboration with Israeli defense contractor Rafael Advanced Defense Systems. The focus is on manufacturing specialized systems and mechanical components for air defense infrastructure, aimed at procurement by Germany and allied European nations.
The decision to transform the Osnabrück plant follows Volkswagen’s 2024 strategic plan to end passenger vehicle production at the site by mid-2027 due to ongoing industrial overcapacity. Factory works council disclosures indicate that the defense manufacturing deal aims to safeguard around 1,200 specialized technical roles at the facility. Israel Aurelius and the German state are set to oversee the transition of VW’s Osnabrück plant into a defense project, aligning with broader European industrial shifts to utilize excess manufacturing capacity through military hardware production.
Israeli Private Equity Group Collaborates with Lower Saxony on Defense Projects
Volkswagen’s leadership highlighted that the sale aligns with the company’s wider efforts to improve operational efficiency across Europe. VW Chief Executive Officer Oliver Blume explained that the deal offers a sustainable industrial outlook for the Osnabrück site while addressing regional employment responsibilities. Aurelius Capital representatives, led by Managing Director Tomer Jacob, pointed out the facility’s capabilities in precision manufacturing and its skilled workforce, making it suitable for advanced defense production.
This move comes amid mounting financial pressures on traditional European vehicle manufacturers, including declining demand for battery-electric models, high energy costs domestically, and increased competition from overseas firms. Labor union representatives from IG Metall acknowledged that converting civil automotive lines to defense manufacturing is vital for long-term job security in the region, following months of employment uncertainty.
Israeli Defense Industry Partnership Broadens German Military Manufacturing Capabilities
The deal remains contingent upon final contractual agreements, approval from relevant corporate supervisory boards, and formal clearance from German antitrust authorities. Financial specifics, including overall valuation and the distribution of equity shares between Aurelius Capital and Lower Saxony, have not been publicly revealed.
Defense sector experts note that redirecting automotive infrastructure toward military applications is driven by increasing defense budgets among European NATO members. Monitoring committees will oversee regulatory filings and key transition milestones as Volkswagen prepares to wind down vehicle production ahead of full handover. Official updates on approvals and conversions will be shared through regulatory disclosures.